I’LL CUT RIGHT TO the chase. When CanWest Global’s interim television division president Peter Viner was asked Wednesday afternoon, point-blank, by one of the financial analysts who cover the media industry in Canada if the money-losing E! network might be altogether shut down, he said:
“Maybe. That’s an option we have to think very hard about.”
To me, that’s a blockbuster comment. A “wow” moment. That shows that it is so bad in the conventional TV market right now – and inside CanWest in particular – that the broadcaster is thinking about shuttering a TV network serving millions in Quebec, Ontario, Alberta and B.C.
During the conference call to discuss the company’s weak first quarter fiscal 2009 results Viner didn’t break out how much money the E! stations (formerly the “CH” network) are losing, but the mind boggles if one of the options on the table is to just walk away.
CanWest is struggling mightily right now. First quarter results for the TV and newspaper company were poor (and lower than what the Street expected) and the company also warned it was close to being off-side on certain debt covenants with its lenders.
Shares in CanWest closed at 58 cents (!) Wednesday. A year ago. They sold for $6.25.
The company needs help any way it can get it and in Canada, that means the Commission will have a big role to play. The next regulatory front CanWest has in its sights is the spring’s license renewal hearings for its Global TV and E! networks. The Commission now has in its hands the applications by CTV and CanWest and while we will find out in about a month what the two broadcasters want exactly, you can take to the bank that they will be asking for more money and fewer programming obligations.
“We want more flexibility in the production of local content and minority programming,” CanWest CEO Leonard Asper told the conference call.
CanWest wants to make less local programming because it’s too costly to make, while the ad revenue to cover it just isn’t there any more – and it wants cash from the cable and satellite companies, too, in the form of a fee-for-carriage. Just because the Commission has said no twice, doesn’t mean the broadcasters can’t keep asking.
(The Commission, when it hears the license renewals in late April, will also hear the renewal applications from Rogers [Citytv, OMNI] and TVA.)
Asper must look wistfully Stateside where retransmission fees are a growing (but still pretty small) part of broadcasters revenue. Research firm SNL Kagan says American local affiliate broadcasters collectively received at least $180 million in 2008 from cable and satellite companies carrying their signals, but with many agreements coming due soon, that revenue is expected to hit $677 million by the end of 2009 and then rise to $1.3 billion by 2012.
Add all this to the state of the overall economy – which isn’t about to turn around (“We had an okay January and an okay December and if February holds up, we will have an okay result,” is all Viner would say about Q2, which is ongoing) – and 2009 looks like a very tough year at CanWest and for conventional broadcasters in general, which are already under pressure as viewers divide their video viewing time among many platforms and dayparts.
“Global and CTV are in better shape than the second-tier networks,” explained Asper, saying the biggest nets are bleeding less. “Citytv, A Channel and E!… that’s the struggle in the industry.”
So then, will CanWest’s secondary network – E! – really take a bullet? Or was Viner’s cryptic answer to the shutdown question just a clear shot over the Commission’s bow?
What can I say but… Maybe.
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